[01:220:102] - Midterm Exam Guide - Ultimate 17 pages long Study Guide!

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Published on 5 Oct 2016
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01:220:102
MIDTERM EXAM
STUDY GUIDE
Microeconomics
Chapter 3
Competitive market: a market in which there are many buyers and sellers of the same good or service,
none of whom can influence the price at which the good or service is sold
- Note that some competitive markets are different from others; if a company accounts for a large
portion of total sales they are able to influence the prices
Supply and demand model: model of how a competitive market behaves
- The demand curve
- The supply curve
- The set of factors that cause the demand curve to shift and the set of factors that cause the
supply curve to shift
- The market equilibrium, which includes the equilibrium price and equilibrium quantity
- The way the market equilibrium changes when the supply curve or demand curve shifts
The higher the price, the less of the good or service people want to purchase; alternatively, the lower
the price, the more they want to purchase.
Demand schedule: shows how much of a good or service consumers will want to buy at different prices
Quantity demanded: actual amount of a good or service consumers are willing to buy at some specific
price; depends of price they have to pay
- As prices rise, the quantity demanded falls
Demand curve: a graphical representation of the demand schedule. It shows the relationship between
quantity demanded and price
- Almost always do slope downward
Law of demand: a higher price for a good or service, other things equal, leads people to demand a
smaller quantity of that good or service
- “other things equal” is key term to this law
Shift of the demand curve: change in the quantity demanded at any given price, represented by the shift
of the original demand curve to a new position, denoted by a new demand curve
- Increase in demand: rightward shift
- Decrease in demand: leftward shift
- Shift occur at any given price, depends on the demand rise or fall
- Changes in the prices of related goods or services
- Changes in income
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